Correlation Between Alcoa Corp and Olin

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Olin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alcoa Corp and Olin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and Olin Corporation, you can compare the effects of market volatilities on Alcoa Corp and Olin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alcoa Corp with a short position of Olin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Olin.

Diversification Opportunities for Alcoa Corp and Olin

0.8

Correlation Coefficient

Alcoa Corp  Olin

Very poor diversification

The 3 months correlation between Alcoa and Olin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Olin Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olin and Alcoa Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alcoa Corp are associated (or correlated) with Olin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olin has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Olin go up and down completely randomly.

Pair Corralation between Alcoa Corp and Olin

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.07 times more return on investment than Olin. However, Alcoa Corp is 1.07 times more volatile than Olin Corporation. It trades about -0.06 of its potential returns per unit of risk. Olin Corporation is currently generating about -0.16 per unit of risk. If you would invest  3,823  in Alcoa Corp on December 25, 2024 and sell it today you would lose (452.00) from holding Alcoa Corp or give up 11.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Olin Corp.

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Olin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Olin Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alcoa Corp and Olin

The main advantage of trading using opposite Alcoa Corp and Olin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Olin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Olin will offset losses from the drop in Olin's long position.

The idea behind Alcoa Corp and Olin Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.